4 key factors for efficient saving

As the Office for National Statistics releases new figures revealing that Brits are becoming increasingly prudent in their spending habits and investing more in saving, we take a quick look at the key factors to consider before selecting the best savings accounts to meet your needs.

There are a huge number of investment and saving products on the market, but in order to get the most out of your cash you need to evaluate four key factors: funds available, investment term, required access and acceptable risk. These will play a huge role in estimating the best return available and help establish which products meet your own unique economic situation and expectations.

Funds available
The main deciding vote for products here is whether you have a lump sum to invest or are rather looking at regular payments. For best results on a lump sum, products such as saving bonds and cash ISA transfers work really well. If you’re starting from scratch you’ll be looking to make regular payments, in which case a new cash ISA can take up to £5,100 tax free every year, or a high interest savings account allows savers to make regular payments and offers an above average rate of return.

Investment term
Essentially the longer you tie up your money, the better the rate of return offered. So if you’re happy to have your investment sitting pretty, accumulating interest in the depths of a financial product, you’ll do well to opt for a long-term high interest account or investment ISA. If the investment required is short-term, cash ISA’s offer excellent tax-free annual returns.

Required access
If you need to dip in and out of the savings pot, there are suitable products on the market that allow short or no notice withdrawals. For best results shop around for individual products, comparing minimum required deposit and ensuring that there are no penalties for withdrawals. However, for savers who are happy to follow the rules of ‘out of sight, out of mind’, products that limit access, such as high interest accounts that allow only one annual withdrawal, often offer better rates.

Acceptable risk
Your position both pre and post global recession will no doubt dictate how much risk you are prepared to accept, however there are different levels of risk - investment ISA’s and investment bonds run with the markets, whilst options such as savings bonds and high interest accounts offer fixed rate solutions.

Sarah Maple writes about the best savings accounts and fixed rate bonds.